Like a schoolyard bully, the threat of more sub-prime mortgage problems in the US continues to hang over Australian and global investors. Negativity stirred up by the debt problems in the US was responsible for two slumps in the Aussie share market last year, but local stocks still managed an annual total return "There is hope that the booming Asian region will continue to grow at breakneck speed and in doing so offset any slowdown in the US,'' said wise-owl.com senior equities analyst Simon Guzowski. "In addition to this, we expect the US Federal Reserve to continue cutting interest and help kick-start the US economy,'' he said. Australian economy Macquarie Private Wealth state manager Kieran Purcell said one of the biggest challenges for the new Federal Government was controlling a booming national economy. "The Australian economy remains very strong and is heading towards 5 per cent growth amidst skills shortages and accelerating operating costs,'' he said. Mr Purcell said higher retail spending, rising disposable incomes, tax cuts and a strong labour market have all contributed to the strong Aussie economy. "Business conditions are also at record highs Prescott Securities adviser David Middleton growth, stresses were starting to develop in the Australian economy including skilled worker shortages, housing affordability, water shortages and clean energy generation. But the prospect of a recession in Australia seemed remote, he said. Global economy Overseas, it's a different story. Many analysts expect a recession in the US, the world's biggest economy, as the sub-prime woes continue to hit banks and the housing sector. BankSA managing director Rob Chapman said the extent of the sub-prime problems would not be clear for months because British banks were Elsewhere, China and India are leading the way in economic growth, while other Asian countries are also growing strongly. more modest share market returns in Australia, "At this stage we expect that an easing in monetary policies in countries such as the US, combined with the strength in emerging economies such as China, will to some extent offset the weakness in U.S. housing and the consumer, and should allow the global economy collapse,'' he said. Mr Guzowski said the biggest threat to global growth was the freezing up of liquidity in credit markets. "Quite simply, it means that businesses and spending and economic activity,'' he said. "All that easy money we've enjoyed for some time now is starting to dry up.'' 16 FINANCE Is 2008 the year of the bear? Australian Property Investor Available at leading Newsagencies or by Subscription at www.australianpropertyinvestor.com